New Presidential Coins Mean Payday for South Korean Subsidiary

The one-dollar presidential coins that make their debut on Presidents Day gleam with nationalistic pride. But to some advocates of U.S. manufacturers, the new coins are downright un-American.

That's because the metal is being supplied partly by PMX Industries of Cedar Rapids, Iowa, a subsidiary of Poongsan Corp. of Seoul, South Korea. The U.S. Mint will pay millions of dollars to PMX and Olin Corp. of East Alton, Ill., to provide the metal strip used to make four different presidential coins annually for the next 10 years. And if past payments are an indication, it won't be chump change; the Mint has paid $756 million to PMX and $715 million to Olin for metal used in coins since 1999, the first year for which the Mint was able to produce such data.

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The Mint and one of its top congressional supporters contend the arrangement is good for the companies, their American workers and the government, which benefits from lower prices when there's competition between vendors. But a consortium of small and mid-sized U.S. manufacturers argues that the federal government shouldn't be open bidding to foreign or foreign-owned companies based in countries with markets less open to U.S. products, particularly when the contract is for something as symbolic as currency.

"This is just one more example of how the U.S. government attaches a very low priority to ensuring that the interests of domestic U.S. companies are adequately safeguarded in global competition," said Alan Tonelson, a fellow at the U.S. Business & Industry Council. "Especially when it comes to South Korea, which is a proven subsidizer and which has not been devoted to free trade principles. It seems that U.S. government agencies ought to be obligated to look very carefully at those bids to make sure that the prices that are being quoted are in fact the result of free-market forces."

A South Korean government-owned bank arranged two $70 million loans to PMX in 2001 and 2003, according to Korean press reports. Tonelson said that such loans are basically subsidies, and ones that wouldn't be easily accessible to foreign-based subsidiaries of U.S. companies.

"Olin is not only competing against a South Korean company, it's competing against the South Korean government," he said.

An official from Olin declined to comment on the company's competition with PMX.

Though coin production doesn't cost U.S. taxpayers a dime (the continuing circulation of coins requires new ones to be minted, thus infusing more cash into the economy), the U.S. Mint is the mother lode for coin metal producers. It produces 10 times as many coins as any other country, said the Mint's director, Edmund Moy. But it doesn't buy coin metal directly from foreign companies.

When Poongsan, already among the world's leading coin metal and ammunition suppliers, wanted to crack the Mint market late in the 1980s, the company established a stateside subsidiary. In 1992, PMX opened a $300 million plant in Cedar Rapids with a ribbon-cutting and tree-planting ceremony attended by then-first lady Barbara Bush, whose family is friendly with the Ryu family that founded Poongsan. About a year after opening, PMX got its first contract from the Mint.

The company employs nearly 500 people, said PMX coinage sales manager Sharon Wendel. Three of the five directors PMX listed last year on a filing with the Iowa secretary of state's office were also listed as members of Poongsan's board of directors on that company's 2006 annual report. That includes Jin Roy Ryu, who is the chairman and CEO of both companies and son of founder Chan-U Ryu. He serves in leadership positions for various international trade groups, Korean business and defense associations, and U.S. non-profits. Ryu organized trips to South Korea for former President George H.W. Bush and former Secretary of State Colin Powell, according to Korean media reports. And Ryu helped raise about $1 million from Korean companies for the George Bush Presidential Library, according to former library director Don Wilson, who also served as chief archivist of the United States. The businessman was friends with the Bushes, he added, "but I wouldn't say any more than any of their 10,000 friends. They have a tremendous network of friends."

Ryu's sister, Mi Ahn, who preceded him as PMX president, once served on an advisory committee appointed by the U.S. trade representative.

According to Senate records, Poongsan paid for the bulk of the $2.2 million the two companies spent lobbying the U.S. government on issues from its mint contracts to U.S.-Korea trade relations and defense appropriations. In 2004, Poongsan won a $42 million contract to provide ammunition to the U.S. Army.

It's difficult to determine what the U.S. government's largesse has meant for PMX's bottom line, since the company is private and isn't required to disclose detailed information about its finances or structure. Rep. Mike Castle, R-Del., is a leading backer of the bill that created the presidential coin program. He said he'd prefer all the profit from producing the coin of the realm would remain in the realm.

"But, if you get into the economics of it, that would change my answer, obviously," he said. Having competition for the contracts -- even from only two companies -- drives down prices, he added, and having the work done in the United States means jobs. "American workers are benefiting even if all the profit doesn't stay in America," he said.